The Navy and developer Doug Manchester won an federal appellate court ruling Wednesday, paving the way for a year-end ground breaking on the $1.2 billion Navy Broadway Complex, arguably the county's single most expensive commercial development.

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A three-judge panel of the 9th Circuit Court of Appeals voted 2-1 against a claim that the Navy did not adequately consider the project's vulnerability to terrorist attacks.

"The Navy considered the relevant factors in its 'hard look' at potential terrorism at the Navy Broadway Complex," the majority ruled, and did not "abuse their discretion" in determining that there is no "significant impact from the possible environmental effects" of a terrorist attack.

Perry Dealy, Manchester's project manager, said he will restart work needed to break ground on the 2.93-million-square-foot project, seven-building Manchester Pacific Gateway, located between Pacific Highway and Harbor Drive, south of Broadway.

"We're going to remobilize and start working diligently to position ourselves to commence at the end of the year," Dealy said.

He said additional plans need to be approved by Civic San Diego, the city's designated arm responsible for dealing with the project. Contractors need to be lined up to start grading, and a search for financing must resume.

"This obviously helps substantially to have this legal impediment resolved," he said.

However, attorney Cory Briggs, who represents the San Diego Navy Broadway Complex Coalition in the lawsuit, said he had not yet read the ruling, and declined to comment, other than to say grounds remain for additional action. They could include a new hearing before the full appellate court.

Judge James Carr said in dissent that the Navy should have considered such impacts "of at least a few attack scenarios" and noted the Navy only revised plans to strengthen the Navy's replacement headquarters against an attack on the complex, but did analyze not the potential environment impact around it.

This was the seventh favorable ruling since Manchester won a 99-year lease from the Navy in 2006 for the 15-acre site, which the Navy has occupied since the early 1920s.

"I don't want to do anything to antagonize Cory," Dealy said. "I hope we can move forward without any other legal challenges. I don't know what else he can do."

Critics have previously argued that the property should revert to the city and be redeveloped as a waterfront setback park along the lines of Chicago's much admired Millennium Park. Manchester's plan calls for a 1.9-acre park at the southeast corner of Pacific Highway and Broadway.

Opponents also argue the development is too dense with four office buildings, two hotels, a museum and retail promenade. They cited the terrorist threat as a reason to at least relocate the 351,000-square-foot Navy building, which Manchester would build at no cost to the taxpayers between F and G streets, offsite, perhaps at a local Navy base.

The California Coastal Commission had approved the project in the early-1990s and then reversed itself in 2013, saying conditions downtown had changed so much that the project no longer complied with the state coastal law. The commission sued the Navy and Manchester for reconsideration but dropped the case last August after some changes in the plan were made.

The Briggs lawsuit, filed in 2011 and appealed in 2012, was argued before the appellate court in February last year.

Supporters of Manchester Pacific Gateway say the project would revitalize a key waterfront site that has been off-limits to the public for nearly a century and replace it with high-rise developments that could draw more people to the waterfront and generate new property, sales and hotel taxes.

Even though the land will remain in federal hands, the owners of the new improvements would pay possessory interest property taxes, just as tenants on nearby port tidelands do so today.

The project originated in the 1980s, when the Navy desired a new regional headquarters but could not gain an appropriation from Congress. Then Rep. Bill Lowery, R-San Diego, won approval for a novel approach -- get the Navy a building at no cost to taxpayers in exchange for granting the rest of the site to a developer for commercial development.

Since Congress gave its consent in 1986 to the Navy redevelopment, much of downtown has undergone a complete transformation. Improvements include new office, residential and hotel towers; parks; the Midway aircraft carrier museum and completion of the San Diego Convention Center in 1989. In 2004, Petco Park opened followed by the new Central Library in 2013. Two years ago, the first phase of the North Embarcadero Visionary Plan to beautify the waterfront from Navy Pier to B Street Pier was completed.

Over the same period, concern has risen over the nation's vulnerability to terrorist attacks, resulting in greater security and hardening of public and private buildings and infrastructure.

Manchester himself has built new hotels downtown and elsewhere and bought and sold The San Diego Union-Tribune.

Dealy said he had been waiting for months for a favorable court ruling.

"We're still in shock," he said, even though his attorneys had assured him of victory. "Every time the phone rings, I think it's good news and then it's nothing. It's just a good day for the project."

He said it will take time to get ready for construction.

"You can't just flip the switch in five seconds," he said. "We have to get everybody lined up -- it's a huge project and we've got a lot of components to it."

He said late last year that he had hoped to start grading by March but then put everything on hold when the court did not act. Now it will take until the end of the year to get all the paperwork in order for grading to begin.

He said it's likely the Navy building will now probably not be completed until 2019. Once that is done, the two existing Navy office buildings on the site can be demolished and the hotels, commercial office buildings and other features can proceed.